Is it possible to hold a second VA loan? Can you have two VA loans at the same time? In an attempt to clarify this common VA loan concern, we discuss the different forms of entitlements and the relevance of county loan limits.
The United States Department of Veterans Affairs’ mortgage program remains undoubtedly one of the best mortgage programs to exist to date.
With its 100 percent financing offer, no mortgage insurance requirement, and lenient underwriting process, it’s the easiest vehicle to homeownership for our country’s military service members, reservists, national guards both on active duty and veterans as well as their eligible spouses.
However, different misconceptions about the program surfaced throughout the years, preventing many from taking advantage of their benefits.Get today’s VA loan rates.
One of these misconceptions is the notion that you can’t have two VA loans at the same time.
To set the record straight, the VA benefit is lifetime, meaning eligible VA borrowers and homeowners can use their VA entitlements again and again for life. The only prerequisite is that the previous VA loan should be paid off beforehand. The VA entitlement is restored once the prior VA loan is paid in full.
Who would need a second (or third) VA loan?
For starters, there are plenty of scenarios why an eligible VA borrower or homeowner would need a second (or third) VA loan. For instance, many active duty military personnel need to move due to being reassigned. For those who don’t want to sell their homes, they can keep the first home or rent it out while securing a new loan for a new home. However, this is only possible if the individual has a remaining entitlement following the usage of his or her first VA loan.
Types of entitlement
There are two types of VA entitlements: a) the basic entitlement and the b) bonus entitlement.
The amount of a basic entitlement is $36,000. This is the amount that the VA will pay to the lender in the event that the VA borrower defaults on his or her loan. The bonus entitlement, also called the second-tier entitlement typically costs $$70,025 and only kicks in if the amount of the VA loan goes over $144,000.
The VA entitlements can essentially be used for any loan amount without a limit but there is a cap on how much the VA will guarantee based on individual county limits. So for example, if you’re in a county with a designated limit of $350,000, the VA will only make a guarantee based on this limit.
This table below shows the maximum guarantee caps for different loan amounts.
|VA Loan Amount||Maximum Guarantee||Special Provisions|
|Up to $45,000||50% of loan amount||25% of Streamline Loans|
|$45,001 – $56,250||$22,500||Same as above|
|$56,251 – $144,000||40% of the loan amount, with a maximum of $36,000||Same as above|
|$144,000 or more||Up to an amount equal to 25% of the county loan limit||Same as above|
If the VA veteran qualifies for a $144,000 loan, then he or she still has his or her second-tier entitlement. A major con of this setup, however, is that VA homeowners planning for a second loan can’t own another VA-mortgaged home in the same city as VA loans are exclusively for the purchase of owner-occupied properties.
If the second loan exceeds $144,000, the bonus entitlement will be used. A disadvantage of this setup is that, ideally, VA loans offer 100 percent financing, allowing the veteran to purchase or refinance a home without any down payment. That’s pretty neat. But this changes if you get a second VA loan approval. If the amount of entitlement is exceeded, the borrower is required to pay a 25 percent down payment to cover the amount that the entitlement fails to cover.Find out if you qualify for a VA mortgage.
The bottom line
It’s easy to get lost in VA loan jargons and figures. Before you go ahead and make the decision to get a second VA loan, make sure you understand the situation you are in and what you are up against.Click to See the Latest Mortgage Rates»